The Australian and New Zealand dollars hovered near three-month highs on Wednesday as rebounding iron ore prices and a shake out in bullish US positions ahead of a Federal Reserve policy meeting drove the Antipodeans higher. The Australian dollar held at $0.7990, having jumped 2.1 percent on Tuesday, the largest one-day gain in more than three years. It climbed as high as $0.8028, a peak not seen since January, in a marked turnaround from a six-year trough of $0.7534 set earlier in the month.
The Aussie has gained 4 cents so far this month, largely due to US dollar weakness as investors pushed back expectations of the start of the interest rate tightening cycle in the United States. The Fed holds its policy meeting later in the session and the focus is squarely on any hints of when the central bank might begin raising rates. Also underpinning the Aussie were markets trimming wagers on an imminent easing by the Reserve Bank of Australia (RBA), while a further bounce in the price of iron ore, Australia's top export earner, lent support.
"The Aussie exploded through the 80-cents US level overnight," said Stephen Innes, a senior trader at OANDA Asia Pacific. The euro also dropped to a two-year low of A$1.3666 to be last at A$1.3700, while the Aussie popped above 95 yen for the first time since January. The New Zealand dollar stood at $0.7710, having risen 1 percent on Tuesday. It touched a three-month peak of $0.7740, but slid to a five-week trough around NZ$1.04 against the Aussie.
Longer-dated New Zealand government bonds eased, lifting the yield on the 2027 bond 1.5 basis point higher. Australian government bond futures dropped to multi-week lows, with the three-year bond contract off 3 ticks at 98.050. The 10-year contract shed 6 ticks to 97.3850, leading to a bearish steepening of the curve.
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